Good morning, everyone, and welcome to Borregaard's presentation of the third quarter 2026 results. My name is Tom Erik Foss-Jacobsen, CEO of Borregaard. I am joined today by our CFO, Per Bjarne Lyngstad, and together we will take you through this agenda. I will start with the main highlights, followed by an update on our business segments and the outlook for the fourth quarter. I will then hand over to Per Bjarne, who will take you through the financial performance in more detail.
Before we begin, just a quick reminder to those of you watching the live webcast that you are welcome to submit questions at any time during the presentation, and we will address your questions at the end. Let us start with the highlights for the third quarter. The key message is strong execution. EBITDA reached an all-time high of NOK 557 million, with a record margin of 29.4%.
Results improved across all business areas, and BioMaterials delivered an all-time high result, supported by higher deliveries and strong production of speciality cellulose. More broadly, the performance was supported by high production and stable operations at our site in Sarpsborg, contributing also to lower unit costs. The result also benefited from savings from our cost improvement program and from optimization of our flexible energy system.
Selective price increases at the beginning of the quarter also provided further support to the record result. Overall, the result was driven primarily by operational execution and disciplined cost management. In BioSolutions, the average price in sales currency was 5% above the third quarter last year, supported by selective price increases and a slightly more favorable product mix. Sales volume was 4% lower. The demand remained good across most of the portfolio, although some end markets remained weaker, particularly crop protection within agriculture.
Our highly diversified portfolio helped mitigating these variations in demand. Measured in Norwegian kroner, the average gross sales price was negatively impacted by a weaker U.S. dollar and euro compared with the same quarter last year. In the BioMaterials business area, sales volume was 24% higher than in the third quarter last year, driven by higher deliveries and strong cellulose production. The year-on-year increase should also be viewed in the context of the temporary production disruption we had last year in the third quarter. The average price in sales currency was 1% below last year.
Selective price increases were implemented here as well, and the product mix improved somewhat. However, the average gross sales price in NOK was negatively affected by the weaker U.S. dollar and euro. Overall, the quarter was characterized by healthy demand, high deliveries, and strong operational execution. Turning to Fine Chemicals. Deliveries of both fine chemical intermediates and the bioethanol were higher than in the third quarter last year. Selective price increases were also here implemented for the fine chemical intermediates, and the business area also benefited from a positive net currency impact.
Altogether, these factors contributed to another solid quarter for Fine Chemicals. I would then like to conclude my part of the presentation with the outlook for the fourth quarter. In BioSolutions, sales volume is expected to be between 75,000 tons and 80,000 tons, with a product mix broadly in line with the fourth quarter of 2025. In BioMaterials, the sales volume is expected to be between 35,000 tons and 37,000 tons. The share of highly specialized grades is expected to be broadly in line with the fourth quarter last year. In Fine Chemicals, the bioethanol deliveries are expected to be notably lower than in the fourth quarter of 2025.
For fine chemical intermediates, the product mix is expected to be significantly weaker than in the third quarter this year. This is something we also have communicated earlier. Turning to costs. Wood costs are expected to remain broadly in line with the third quarter this year. Spot prices for electricity and LNG, as well as sulfur costs are expected to increase further. Energy consumption will also be seasonally higher, and the annual maintenance stop at the Sarpsborg site will affect the production volume in the quarter. At the same time, the cost improvement program, our long-term energy contracts, and the optimization of our energy system are expected to continue to contribute positively.
Global uncertainty related to wars, conflicts, and tariffs is expected to continue impacting our key input costs, our markets, and our currencies. In summary, normal seasonality, the annual maintenance stop, and higher energy-related costs are expected to affect performance in the fourth quarter. With that, I will hand over to our CFO, Per Bjarne Lyngstad, who will take you through the financial performance in more detail.
Thank you, Tom Erik, and good morning, everyone. Borregaard's operating revenues in the third quarter increased by 5% compared with the third quarter of 2025, mainly driven by higher deliveries of speciality cellulose. EBITDA reached an all-time high of NOK 557 million, NOK 117 million above the third quarter last year. All three business areas delivered improved results, driven, like Tom Erik said, by the strong operational performance at the Sarpsborg site, savings from the cost improvement program, long-term energy contracts, and energy system optimization, and from selective price increases, which we are implementing at the beginning of the third quarter.
The net currency effects were positive by about NOK 15 million compared with the third quarter last year. The EBITDA margin reached a record high of 29.4%, about 5 percentage points above the margin in the third quarter of 2025. Earnings per share increased to NOK 2.96, compared with NOK 1.96 in the third quarter last year. Year-to-date, earnings per share, adjusted for non-recurring items in the second quarter, was NOK 7.13, slightly above the NOK 7.03 we had year-to-date last year. In BioSolutions, operating revenues declined by 3%, mainly due to lower sales volume.
EBITDA increased by NOK 7 million to NOK 284 million. Selective price increases and savings from the cost improvement program were the main reasons for the improved result. Net currency effects were negative for BioSolutions in the quarter. The EBITDA margin increased to 27.8%, 1.6 percentage points above the margin in the third quarter last year. BioMaterials' operating revenues increased by as much as 22% from the third quarter of 2025, primarily driven by higher speciality cellulose deliveries.
In the third quarter last year, both operating revenues and EBITDA in BioMaterials were affected by a temporary disruption in the cellulose production line. EBITDA reached an all-time high for BioMaterials of NOK 210 million, up NOK 98 million from the third quarter of 2025. Higher deliveries and strong production were the main drivers of the improved result. Selective price increases implemented in the third quarter contributed positively compared with the first half of 2026. Lower wood costs and savings from the cost improvement program were partly offset by higher sulfur costs.
Higher spot prices for electricity and LNG were largely offset by long-term energy contracts and the contribution from optimizing Borregaard's flexible energy system. More than 80% of Borregaard's need for heat energy is covered by long-term contracts. Net currency effects were positive for BioMaterials in the quarter, and the EBITDA margin also reached a record high of 29.6%, an increase of slightly above 10 percentage points compared with the third quarter last year. In Fine Chemicals, operating revenues increased by 3% compared with the third quarter of 2025, mainly due to higher sales volume.
EBITDA reached NOK 63 million, NOK 12 million above the third quarter last year. The result improvement was driven by the higher deliveries of both fine chemical intermediates and bioethanol, selective price increases for fine chemical intermediates, and also in this area, savings from the cost improvement program. Net currency effects were positive for Fine Chemicals. The EBITDA margin increased to 37%, 6 percentage points higher than in the same quarter last year.
As mentioned earlier, the net currency impact on EBITDA was positive by about NOK 15 million compared with the third quarter last year. Hedging gains were NOK 57 million, compared with a loss of NOK 21 million last year. The positive change in hedging effects was largely offset by the impact from a stronger Norwegian kroner. Using Borregaard's currency basket, the Norwegian kroner was about 7% stronger compared with the third quarter of 2025. Using currency rates as of yesterday, the net currency impact for the full year of 2026 is now estimated to be positive by about NOK 25 million compared with the full year of 2025.
The corresponding impact for the fourth quarter is estimated to be positive by about NOK 5 million compared with the fourth quarter of last year. The cash flow from operating activities was a solid NOK 449 million in the third quarter, driven by the cash effect from the all-time high EBITDA. Investments were NOK 168 million in the quarter. The largest expenditures were related to the debottlenecking project and the upgrade of the electricity transformation capacity at the Sarpsborg site. Net interest-bearing debt decreased by as much as NOK 286 million in the quarter.
At the end of the third quarter, Borregaard remained well-capitalized with an equity ratio of 61% and a leverage ratio, which is net interest-bearing debt over EBITDA of 0.97x. That concludes today's presentation. Tom Erik and I will now be ready to answer any questions, both from the audience here in Oslo and from those following the webcast. Our Director Investor Relations, Pål Espen Ramberg, will moderate webcast questions.
Thank you, Per Bjarne. The first one is from Fabian Jørgensen at Pareto. Do you view the Q3 as evidence of a structural higher BioMaterials margin, or was it an exceptionally strong quarter? Given the current visibility, what should we expect for next year? Margins.
Yeah. I would say it was an exceptionally strong quarter, given also the strong operational performance we have at our site in Sarpsborg. Looking forward, we maintain the long-term target for our margin that we communicated also at our Capital Markets Day with a 25% EBITDA margin across our business. We stick to our target, which Per Bjarne communicated was ambitious but achievable.
Thank you. This is the only question from the web, so if it's someone in the audience.
Yes, Magnus Rasmussen, SEB. Just wondering if you can quantify the energy and sulfur cost increase for Q3 year-on-year, and if you could do the same for Q4 given your guidance.
We are not too happy about giving concrete numbers on that. But what we said about sulfur, to take that first, is that the cost will double. And if you look at the sensitivity slide that we had at our CMD, you will see that the increase will be then about NOK 55 million. So we had a doubling of the cost for sulfur. What was the other question about?
Yeah, just I get that it's hard to guide, but for Q3, roughly raw material costs year-on-year. There's a big cost beat on the consensus today. So just to get some—
That is mainly related to energy where we had this optimization of our energy system, which really countered a lot of what we bought of spot energy prices. And by optimizing, I mean that we have now the flexibility to switch on quite short notice between LNG and electricity based on how those two prices fluctuates. And that with the high electricity prices we saw in the quarter, that's really given quite a significant benefit and took away most of the increase of the energy cost.
And you also state today that you are seeing some effects on the cost improvement program. Can you share some thoughts about how that's progressing? How much effects are you seeing so far?
Yeah. We state that there are three factors in the quarter that are contributing positively. These are things we are actively impacting with our own initiatives. That is the cost improvement program, it is the energy, and it is selective price increases on the cost. I think all these factors are important contributors to the result in a quarter. The cost improvement program has had a good start, which means it is already contributing well. We think that will continue into the quarters to come. We still maintain also here our target that we have communicated, NOK 150 million, with full effect from 2028. We had a good start to the cost improvement program.
Thanks. Then finally on the price increases. There is a significant price increase in sales currency for BioSolutions, for example. Can you comment a bit about what you are doing there? We do not usually see changes, I guess, in the third quarter. Is this due to the cost picture that you see, or are there other reasons?
Also here, we have seen that the organization has taken measures where we are able to do it. Across BioSolutions, BioMaterials, we have done selective price increases, contributing also significantly to our quarterly results. This is, I would say, due to our competitive position. Synthetics these days have been increasing in prices. We are offering bio-based solutions competing directly with these as a good alternative. That has given us some abilities to move prices.
Mix is a part of the 5%. So it is not just price increases. To make 5% quarter-on-quarter is a lot. So it is a mix effect.
It's not in that range in average.
Thank you.
One more from the web, from Elliott Jones at Danske Bank, related to the debottlenecking project. Can you provide an update on the debottlenecking project related to timeline and how much CapEx remains for the project?
The timeline is, as we've said before, we expect to start up in the second quarter of next year. Still, there are quite a substantial payout remaining from the investments. We will see very high investments in the fourth quarter like we normally have every year. This year it will be additionally high because we have put in a lot of equipment in the maintenance stop, where we will get the invoices throughout the fourth quarter. A lot of that is related to the debottlenecking. I think we will have quite some spending in the fourth quarter and into the first quarter next year. Everything is running according to plan, really, with that project.
Thank you.
Yeah. Hi. Thank you for your presentation. It was very enlightening. I am Anastasia, I am private investor, and I was wondering about currency rates. What do you think if current currency rates persist, what impact do you expect on earnings in the years that follows? Thank you.
Yeah. We have, as you probably know, a currency hedging strategy. With the currency rates, I talked about NOK 57 million in gains this quarter. It means that our hedging rates, and you can find them in the appendix to the presentation, are higher than the present rates. We only hedge for three years going forward, up till three years.
It means that if current rates persist, we will have less gains from hedging, and we are talking quite large number, NOK 300 million-NOK 400 million in the years to come as a reduction of EBITDA. That is the main reason why we also started the cost improvement program, that we see that coming, and our ambition is to keep our margins when those currency gains go away. That is really why we start early on really looking at more thoroughly at costs.
Okay.
No more questions? And we are done.
So that concludes our presentation for today. Thank you very much for listening in and taking time to be with us. Wish you all a good day.
Thank you for your attention.